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You Need a Machinery and Equipment Appraisal for a Buyout Agreement

February 22, 2012

A buyout agreement, or buy/sell agreement, details the way a business will buy the shares of a co-owner who wants to leave the business or partnership to retire, who wants to sell the business, or who is terminated. The buyout agreement is a legal document written to protect all parties involved in the buyout. You should write the document as close to company’s inception as possible, because as the company’s value grows, the risk of not having one increases.

A well-written buyout agreement will detail the buyout’s financial terms, will decide who will oversee the buyout, and it will discuss ownership transfer. The buyout agreement will also say how the company’s value at the time of the buyout will be determined.

Many things go into the value of a company, both tangible and intangible property. Because of the number of things that factor in to the value, it can be difficult for a business owner to determine the true value of the business without some professional assistance. Many companies that have buyout agreements decide to let an objection third party, like a certified machinery or equipment appraiser, determine the company’s value. A certified appraiser will be able to provide a fair and accurate value that will be defensible in court.

A good exercise for business owners is to hire an appraiser to conduct a business valuation, including an appraisal of all machinery and equipment, just before writing the buyout agreement. Many business owners find this initial appraisal useful when writing the agreement.

The NEBB Institute endorses and strives to observe the highest standards of professional ethics to preserve the public trust inherent in the professional appraisal practice. The Institute provides initial and monthly comprehensive education, ongoing support, and a dynamic international network, and certifies professionals in the art of machinery/equipment appraisal and brokerage.

 

By: NEBB Institute

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